Are Markets Still Worried About an AI Bubble?

0:00Today on the AI Daily Brief, as Meta and Microsoft report earnings, are markets still worried about an AI bubble. Before that, in the headlines, SoftBank appears ready to double down on OpenAI with another$30 billion investment. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. All right, friends, quick announcements before we dive in. First of all, thank you to today's sponsors, Zencoder, Rackspace, Robots & Pencils, and Super Intelligent. To get an ad-free version of the show, go to patreon.com slash aidailybrief, or you can subscribe on Apple Podcasts.

0:36If you are interested in sponsoring the show, send us a note at sponsors at aidailybrief.ai. Now, one more thing that you can find at aidailybrief.ai, we have a new thing we're doing, which is in conjunction with AIDB Intel, which is a monthly pulse survey to figure out how people are using AI and how it's changing. You can find a link on the main aidailybrief.ai website, and it's a short survey that should take much less than five minutes. It basically asks things like, which AI models did you use this month? Which AI model did you use the most? What was your most important use case? all in a very easy checkbox multiple choice style format.

1:08It's part of our larger goal of helping people have up-to-date actual data about what's going on with AI. And I would so appreciate it if you would take a couple minutes to fill it out. Anyone who contributes will get first access to the results at least a week before they are available for general consumption. And again, you can find everything about that at AIDailyBrief.ai. Welcome back to the AIDailyBrief Headlines Edition, all the daily AI news you need in around five minutes. What's$30 billion between friends, right? Right. Mazesan is in for another$30 billion as SoftBank appears to double down on OpenAI.

1:37The Wall Street Journal reports that SoftBank is in talks to invest another crisp$30 billion into OpenAI's next monster fundraising round. SoftBank is already one of OpenAI's largest shareholders, with a roughly 11 % stake after investing$30 billion last year. That funding seemed to stretch SoftBank's pockets, with the firm selling off NVIDIA stock and taking loans against their AMD holdings to make it work. While rumors have been sparse, reporting from December suggested that OpenAI is targeting$100 billion in fundraising this year. The valuation is said to be$830 billion, which is another 66 % jump from the$500 billion valuation struck in October.

2:12Frankly, it looks like they're well on their way, with separate reports suggesting that NVIDIA, Microsoft, and Amazon are looking to participate to the tune of$60 billion between them. Now, in my 2026 predictions, I debated a bunch, but I ultimately came to the base case that I didn't think that Anthropic or OpenAI would actually go public in 2026, with the reason being that A, public markets are kind of a pain in the butt, and B, I thought there was just going to be enough funding for them in private markets that they weren't going to be forced to go public. Now the capital needs are extreme here and so maybe they just have to take advantage of every option they have, including IPO, but with OpenAI well on their way to that $100 billion round, they certainly are going to have their options.

2:47Moving over to OpenAI competitor Anthropic, ServiceNow has signed another big AI deal, this time with Anthropic, partnering with the lab along multiple angles. The multi-year deal includes making Claude the default model across ServiceNow's platform. Claude will also drive their agent builder, which allows users to create custom workflows and VibeCode apps. In addition, Claude access is being rolled out to all 29 ,000 ServiceNow employees, including Claude Code for the engineering team. ServiceNow CEO Bill McDermott said in a press release, ServiceNow with Anthropic is turning intelligence into action through AI-native workflows for the world's largest enterprises.

3:21Together, we are proving that deeply integrated platforms with an open ecosystem are how the future is built. Now, details of the deal weren't released, so we don't know the length or monetary value. But the deal comes just a week after ServiceNow extended their other big deal with OpenAI, suggesting that they want to make sure that customers have access to AI from both companies. ServiceNow president Amit Zavery said, We don't view these partnerships as competitive or mutually exclusive. Enterprise customers want model choice. They want the right model for the right job, keeping governance, security, and auditability consistency on the ServiceNow AI platform.

3:52Each model brings different strengths, and our role is to orchestrate them in ways that deliver the best outcomes for customers. And as much as that sounds like corporate speak, the reality is that one of the great frustrations for enterprise AI users is model lock-in. So to the extent that they can work with partners like ServiceNow where they have access to multiple models, for many people that's going to be desirable. Staying in the anthropic world for a minute, Claude Cowork has apparently raised the alarm at Microsoft. The information reports that the release of Anthropics' new productivity platform triggered emergency meetings.

4:22Product leaders at Microsoft told colleagues that Cowork seemed like a competitor for 365 Copilot. They noted that Cowork seems more capable than Copilot when working on Excel spreadsheets or PowerPoint slides. Staff were told to keep improving Copilot, and that seems to be exactly what's happened over the past two weeks. Sources said that multiple divisions at Microsoft are working on prototypes that mimic the functionality of Cowork. And they noted that Claude, which Microsoft now has access to, is powering many of these prototypes. Now, obviously, Microsoft's relationship with OpenAI has been changing.

4:50But in many ways since the release of ChatGPT, Microsoft has been largely focused on keeping feature parity with OpenAI. Now it's pretty clear that keeping up with Anthropic has become their major concern. The reporting also noted a tension between Anthropic's ability to move with startup speed, i.e. they built Claude Cowork in 10 days, as compared to Microsoft's status as a lumbering tech behemoth. In addition to the speed of execution, there's also differences in what the companies can put out. Sources noted that Cowork is only available as a research preview, and that Anthropic has warned users that it carries massive inherent security risks, which is all well and good for Anthropic, but Microsoft wouldn't be able to release a version of Copilot that carries that same level of risk.

5:27Still, it sounds like all hands on deck at Microsoft to keep up in the race. Executives and product leaders are reportedly discussing possible new features in a Teams channel called AI Accelerator. CEO Satya Nadella was even reportedly dabbling with Clodbot, now called Moltbot, over recent days. Nadella encouraged staff to also test the automation tool and figure out how its features could be applied to Copilot. The information writes, The conversations are part of Nadella's effort to pressure deputies to speed up the company's use of AI in its products, and they resemble how other AI developers, including Google and OpenAI, have reacted with urgency to competitive products in the fast-paced field.

6:00He has sounded alarms about the urgency of the situation despite his company's position of strength as the world's fourth most valuable firm. Nadella reportedly now has a standing weekly meeting where staff can demo new features from competing labs. Sources said that many of these meetings have featured Claude Code driven by Opus 4.5, and they mentioned that the release of Co-Work has ramped up the urgency of the meetings in recent weeks. At this stage, the reporting doesn't include the term Code Red, but you have to think we're not far from an all-out response from Microsoft. Twitter was, of course, ablaze with jokes.

6:28Kyle Russell wrote, Meanwhile, a couple of weeks ago, even before this, Gavin Baker said, Clawd Cowork is what Copilot should have been, evidently built in 10 days with Clawd Code while Microsoft has been working on Copilot for years. Although I have to say, one really insightful comment in response to Gavin came from Replit CEO Amjad Massad, who said, To make a bit of an excuse for Microsoft, the world is just waking up to the fact that coding agents are general agents. It's Bitter Lesson adjacent. Writing and executing code will likely outperform years of handcrafting vertical-specific agents with expert knowledge.

7:02Actually, it might exactly map in Bitter Lesson. Program synthesis is a form of scalable search. Given the debates I've been having with you guys around my thesis that code AGI is functional AGI, I thought that was an interesting comment. Moving over to Google's side of the house, Google is getting in the AI browser game with a big agentic upgrade for Chrome. Google first added Gemini to Chrome in September, but that iteration kept the AI sandboxed in its own window. With this update, Gemini will be able to use OpenTabs as context and function as a web agent. That feature set is of course similar to agentic browsers from OpenAI, perplexity, and the browser company, which were all released last year.

7:36Google is even borrowing the UX, placing Gemini in a sidebar for split-screen agentic browsing. One interesting quality-of-life feature that Google showed off was Gemini's ability to understand multiple tabs from the same website as a context group. For example, if you're shopping multiple items against each other, Gemini will understand that context when giving advice. Gemini in Chrome also leverages Google's recently released personal intelligence feature, allowing the agent to draw context from your Gmail search history and photos. The feature will initially be limited to pro and ultra subscribers, so this isn't the free web agent that takes the technology mainstream.

8:06Still, Google is shipping quickly and making a lot of progress with these functional consumer agents. Lastly today, another one that harkens back to one of the discussions in my 2026 predictions, Tesla has made a$2 billion investment into XAI in defiance of a shareholder vote. Elon Musk has been toying with the idea of cross-investment between his two companies over the past year. The matter went to a shareholder vote in November, with over a billion votes in favor and 916 million against. A significant number of shareholders abstained from voting, which counts as a vote against under Tesla's bylaws, meaning the vote technically failed.

8:39However, it seems that Near Enough was good enough for Musk. Tesla disclosed in a shareholder's letter on Wednesday that they made a$2 billion investment in XAI's recent fundraising round. And the investment is apparently all part of the plan, with Tesla writing, As set forth in Master Plan Part 4, Tesla is building products and services that bring AI into the physical world. Meanwhile, XAI is developing leading digital AI products and services such as its LLM, Grok. In that context, and as part of Tesla's broader strategy under Master Plan Part 4, Tesla and XAI also entered into a framework agreement in connection with the investment.

9:09Now, Tesla has already collaborated with XAI by providing them batteries for power redundancy at their data centers, and XAI has also provided Grok in some Tesla vehicles and there's plans to use XAI models to power the Optimus robots. In the shareholder's letter, Musk wrote, If there are things XAI can help accelerate our progress, then why should we not do that? And that is the reason why we've gone ahead with such an investment, because this is part of the strategic initiative. Now, the investment comes as Tesla hits a pretty rough patch. During their Wednesday night earnings call, Tesla disclosed a 61 % drop in profits year-over-year.

9:40They announced that the Model 3 and Model X will be discontinued, with the production line repurposed for Optimus robots. Musk told investors on the call, This year for Tesla is the first major steps as we increase vehicle autonomy and begin to produce Optimus robots at scale. We're making very, very big investments. So this is going to be a very big CapEx here. That is deliberate because we're making big investments for an epic future. Back in July of last year, ZeroXMo on Twitter wrote, Tesla will acquire XAI. There's no way around it. Grok will be the brain for Optimus, so you can't have the brain and the body made by different teams.

10:11It doesn't get you the best product and it's not Elon style. I give it around 12 months. Reflecting on the recent news, the same account wrote, Tesla is investing in XAI and collaborating even closer. It's happening. Now that is going to do it for our headlines, but for the rest of today, we are going to stay on public market themes. Moving now to ask, are markets still worried about an AI bubble?

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14:00Welcome back to the AI Daily Brief. For basically the last quarter of last year, One of the big topics of conversation around AI was whether we were in a bubble. Now, we've talked extensively on this show about why it's important to separate the market conversation about whether we are in a bubble in terms of things like valuation and capitalization for AI companies from whether it's actually significant and meaningful technology that you need to be paying attention to. And yet still, these things are not disconnected. There will, for example, be impacts to the speed at which new, better AI comes to market if additional capital and financing for companies is no longer available.

14:34Now, so far in 2026, markets frankly just haven't had all that much time to worry about AI. Between Venezuela and Greenland and domestic unrest and future government shutdowns, let's just say that the risk-off dance card has been a little full. Yet, of course, this question about an AI bubble has never really gone away. In fact, part of what makes it such a potent conversation is that it is ultimately a debate. There is no way, at least in the short term, of knowing who is right and who is wrong. There is only the loudness with which either side can present evidence. Now, with all that as background, we got some of our first chance to see where markets are in a renewed version of that conversation as we got Meta and Microsoft earnings.

15:11Bloomberg host Caroline Hyde summed it up this way. Meta wins, Microsoft loses when it comes to after hours market reaction to earnings. Both beat on earnings and revenue. Both yanked up CapEx. Both talked of the positive impact of AI spending. But investors found it hard to see the CapEx rewards for Microsoft given the slight slowdown in Azure growth rate versus the previous quarter. Zuckerberg and team did a better job at highlighting the strength of its AI investments are already bestowing on its recommendation system, its video impressions, and therefore its ad success. And 25 % revenue growth.

15:40Zuckerberg also spoke excitedly about the coming year in terms of LLM improvements, meaning current systems are primitive compared to what will be possible soon. That's his quote. So that kicks us off at the high level, but let's dive in and go a little bit deeper. The theme of Meta's earnings call was full steam ahead on AI regardless of costs. Mark Zuckerberg painted a bold vision of what the next few years of Meta's AI product would look like. Now seen as one of the early, if not only, winners in AI wearables, Zuckerberg is doubling down on making Meta Ray-Bans the default options for portable AI.

16:10He told investors, Billions of people wear glasses or contacts for vision correction, and I think that we're at a moment similar to when smartphones arrived, and it was clearly only a matter of time until all those flip phones became smartphones. It's hard to imagine a world in several years where most glasses that people wear aren't AI glasses. And while one could be forgiven for being a little bit concerned about hyperbole there, frankly, Meta's numbers sort of validate that vision. Sales have tripled over the past year, which Zuckerberg characterized as some of the fastest growing consumer electronics in history.

16:40Now, when it comes to AI models, Meta has so far failed to make contact with the consumer, but it's clear they hope to turn that around with their next generation. Zuckerberg basically characterized 2025 as a rebuilding year. And although he didn't make this comparison, Google's turnaround on AI of a couple years ago to now has to be on the forefront of investors' minds. Said Zuckerberg, In 2025, we rebuilt the foundations of our AI program. Over the coming months, we're going to start shipping our new models and products, and I expect us to steadily push the frontier over the course of the new year.

17:11Unlike some of the other AI companies, for Zuckerberg, commerce is the clear focus. He talked, for example, about new agentic shopping tools that will allow people to find just the right set of products from the businesses in our catalog. Meta also aims to catch up on agents, which are of course dominating the enfranchised insider conversation as new products like CloudBot demonstrate just how far the technology can go. Zuckerberg said, We're starting to see the promise of AI that understands our personal context, including our history, our interests, our content, and our relationships. A lot of what makes agents valuable is the unique context that they can see, and we believe that Meta will be able to provide a uniquely personal experience.

17:48Now, on top of all that chatter, the actual earnings were incredibly strong, giving Meta a solid base to pursue these bets. Meta delivered a year-over-year growth rate of 24%, which blew analysts' estimates out of the water. And yet at the same time, the number that got the most attention was, of course, a massive increase in CapEx guidance. Meta said that they planned to increase spending on data centers to as much as$135 billion this year, around 20 % higher than the median analysts' forecast and almost double what they spent last year. They also announced a 40 % rise in expenses, reflecting their huge salary commitments to their new AI research team.

18:24Now, Meta is generating around$60 billion in quarterly revenue at the moment, so these spending goals suggest reliance on debt funding. Still, Zuckerberg has said that the aim is to front-load CapEx and build as fast as possible to get back in the AI race. Rounding out his statement, Zuckerberg told investors,

18:48Now, some had big critiques of Meta's apparent lack of a plan. One analyst asked Zuckerberg to sketch out his 3-, 5-, or 10-year plan for delivering ROI on all of the AI spending, and Zuckerberg kind of sidestepped the question. He responded,

19:09effort. We're six months into that and I'm happy with how it's going. But we are going to be rolling out our initial set of models and products and businesses around that and I'll have a lot more to share on all those fronts at that point. He added not much of this is going to be particularly detailed, but it will be exciting as we roll it out. Others honed in on Meta's new focus on debt financing. KakashianX wrote, Zuck has finished almost all of Meta's cash. Without the issuance of$30 billion in debt, Meta's cash, cash equivalents, and restricted cash equivalents would be less than$10 billion by the end of 2025.

19:36Prominent finance commenter Michael Green said the risk embedded here is astonishing. And yet, ultimately, it seemed that investors liked what they heard, with MetaShares rising 8 % in after hours trading overnight. The story from Microsoft earnings call was something of the inverse, where the perception was that too much caution had led them to miss out on AI opportunities. The headline figure, as we heard from Caroline at the beginning, was a continued drop in cloud growth. One could be forgiven for thinking that this slowdown doesn't seem to actually be that large of a problem. Azure revenues are still growing at a 38 % pace, and the slowdown was only a single percentage point compared to the prior quarter.

20:11Azure is also a much larger division than it was a year ago, making hypergrowth more difficult to maintain. Still, we are in the middle of an AI infrastructure boom, and to some it seems like Microsoft is failing to take part to the fullest extent. Caution has come to define Microsoft's strategy over the past year. Last February, for example, there was a massive news cycle around Microsoft canceling numerous data center projects. CFO Amy Hood insisted that this was largely about forecasted softness and demand, and Microsoft didn't want to be left holding useless data centers if demand dropped off, given the long lead times to complete construction and power up GPUs.

20:42Compare that sort of framing to Zuckerberg, who has basically relentlessly said that the risk of overspending by hundreds of billions on infrastructure is dramatically less than the risk of underspending. In any case, when it comes to Microsoft, they're now faced with a different problem. They disclose that their cloud sales backlog has more than doubled from a year ago to reach$625 billion. Much of that growth came from a new$250 billion commitment from OpenAI. In total, OpenAI now accounts for 45 % of Microsoft's backlog. And so whereas Meta's stock jumped 8 % overnight, Microsoft's stock fell by about 5 % in after-hours trading.